Tech Gains Won’t Offset Future Growth Slowdown, Argues Economist

For Robert Gordon, an economics professor at Northwestern University, the U.S. economy’s best days, economically speaking, are in its past.

In a paper released Monday, the economist builds on his argument that future U.S. growth rates will fall well short of those in the past. Mr. Gordon warns in the paper published by the National Bureau of Economic Research that those who believe technological innovation will overturn this dark forecast are betting on the wrong horse.

Mr. Gordon argues that rapid innovation that generates growth-enable productivity actually stopped happening some time ago. “There is a strong case that technological change is slowing down, not speeding up,” he wrote, noting that U.S. productivity growth is 0.77 percentage points slower since 1972 relative to the 80 years before that.

Mr. Gordon writes that much of the major technologies that have emerged over the past few decades have essentially built on the much bigger and more profound advancements of the past. Things that are heralded to transform the future–such as artificial intelligence, robotics, Big Data and 3-D printing–will likely have much smaller impacts on the nation compared with the profound transformations wrought by electricity, airplanes and the automobile.

Mr. Gordon points to the explosion in powerful mobile technology as emblematic of the current troubles. “The sharp slowdown in productivity growth in recent years has overlapped with the introduction of smart phones and iPads,” he wrote, adding “these sources of innovation have disappointed in what counts, their ability to boost output per hour in the American economy.”

Mr. Gordon also thinks advances in oil and gas extraction in the United States will at best make American energy prices lower than they would otherwise be. He reckons 3-D printing will be limited to small-scale custom operations, and will not re-make the nation’s manufacturing base.

In his paper, the economist rejects the idea that innovation trends are inherently impossible to predict. He notes that at the dawn of electrification and the automobile, there proved to be a number of predictions about the future of those inventions that proved to be relatively prescient.

His paper repeats his views first advanced in a 2012 paper that a mix of demographic changes, deteriorating government finances, income inequality and declining education achievement, will mean that the U.S. will struggle to replicate growth levels once considered moderate at best. The 2% average annual economic growth seen between 1891 and 2007 will give way to something “much slower” over coming decades, the economist wrote.

Mr. Gordon also says that the rapid dissemination of American technology will allow other nations without such problems to leapfrog the U.S. in living standards.

“Over the next 50 years the slowing growth of the American standard of living will result in a passing lane in which one country after another exceeds real GDP per capita of the United States, by being able to buy American innovation while facing headwinds that for many countries are mild breezes compared to the gale force headwinds experienced by the United States,” he wrote.

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